Why the fear-mongering on Medicaid is totally overblown

Charles Blahous holds the J. Fish and Lillian F. Smith Chair at the Mercatus Center at George Mason University.

Over the past several days, Americans have been told that the sponsors of pending health legislation are moving to victimize the most vulnerable people in our society, indifferent to potentially lethal consequences.

A recent New York Times op-ed from three health-care experts described the effort as a “direct attack on our elderly, our disabled and our dignity.” A Post commentary charged lawmakers with “gutting Medicaid so they can give a giant tax break to their billionaire buddies,” threatening life-saving treatments for a young boy with a congenital heart condition. A long-time political adviser charged on national television that sponsors would “kick some kid out of his wheelchair.” And a left-leaning think tank further upped the ante by publishing contrived estimates of the numbers of people (handily broken down by state) who will supposedly be killed by the proposed legislation.

You don’t need to support the pending health-care bills to recognize they bear little resemblance to this explosive rhetoric, nor do you have to support the legislation to realize that our deteriorating political environment is making it impossible to make policy decisions with the appropriate reflection and care.

(Peter Stevenson/The Washington Post)

Before the Affordable Care Act, Medicaid required states to provide coverage for certain groups, including seniors, people with disabilities, pregnant women and families with young children living on incomes less than or near the federal poverty level. The ACA expanded potential coverage to include childless adults with incomes up to 138 percent of the poverty line, but the previously eligible low-income patients who depend on Medicaid for lifesaving treatments would remain covered even if the ACA were fully repealed.

In fact, these vulnerable individuals might even benefit from a repeal in some respects. One controversial provision in the ACA provided a far higher level of federal support for childless adults — who before the expansion had rarely been eligible for Medicaid, regardless of income — than what has been available for the program’s historically eligible population. This imbalance distorted state decision-making, favoring coverage for the expansion population over timely access for the neediest individuals to Medicaid’s limited supply of health services.

The elevated federal payments for Medicaid expansion have also contributed to other problems. For example, some researchers now warn that the expansion has resulted in a shortage of primary-care physicians in Medicaid, although academic studies have produced mixed results.

And in terms of the budget, federal Medicaid costs would rise under current law from $389 billion today to $650 billion annually by 2027 — a growth rate that outstrips our ability to finance it. In both 2015 and 2016, per-capita costs for the Medicaid expansion population came in more than 60 percent higher than previous estimates (largely because states passed on virtually all expansion costs to the federal government). Earlier this month, the chief actuary at the Centers for Medicare and Medicaid Services (CMS) raised projections of expansion’s per-capita costs even further.

The Congressional Budget Office has projected that the pending legislation before Congress would result in large cost savings, primarily by comparing the bills with how Medicaid enrollment would evolve if the ACA remained on the books. That comparison is important, but it obscures how many people would remain on Medicaid’s rolls. In fact, the CMS actuary projects that under the House bill, total Medicaid enrollment will stay roughly constant above 70 million people over the next decade. This is lower than it would be under the ACA, but higher than the enrollment population before the ACA was enacted (roughly 55 million).

Every policy choice has winners and losers. We could continue elevated federal support for Medicaid expansion, which would favor state taxpayers and childless adults over federal taxpayers and poor children, seniors, people with disabilities and pregnant women. Or we could end it, which would have the opposite effect. We must have an energetic debate between these alternatives, while remembering that none of us has a monopoly on wisdom and compassion.

We should similarly have a robust debate over draft provisions to cap per-capita Medicaid spending growth, a previous proposal of the Clinton administration. While the pros and cons of this approach should be weighed carefully, we must nevertheless remain mindful of two key facts: The first is that the proposed caps would have a relatively slight effect on the near-term budget (less than 10 percent of the CBO’s projected savings for the bills’ Medicaid provisions). And second, we can only fairly evaluate caps relative to an alternative strategy for moderating Medicaid cost growth to sustainable levels.

This should not be undertaken lightly: Managing the growing cost of Medicaid is a serious and difficult policy challenge. Lawmakers need to target benefits where they are needed most and align incentives for states to minimize waste and maximize value.

Rhetorically assailing lawmakers as heartless brutalizers in the process will only make our national politics more debased and more dangerous. It will also make the optimal solution much harder to find.